70 % Indian BPO will cease to exist in 2005: Gartner Study

NEW DELHI:As many as 70 percent of the top 15 Indian business process outsourcing startups will cease to exist in the coming months, analyst firm Gartner said.

By year-end 2005, 70 percent of the top 15 Indian owned BPO startups that offer customer call center services will be acquired, merged or be marginalized it said.

Gartner said despite the hype, only a small fraction of customer service outsourcing will be done at offshore locations. Offshore call center, offshore customer service outsourcing only represents a tiny fraction of the market. In 2005, it is expected to be less than five percent of the total and will grow only to less than five percent in 2007, it said.

The worldwide market for customer service outsourcing is set to grow from $ 8.4 billion in 2004 to $12.2 billion in 2007.

Gartner also predicted that through 2007, 80 percent of organizations that outsource customer service and support contact centers with the primary goal of reducing cost will fail.

Up to 2008, 60 percent of the organizations that outsource parts of the customer facing process will encounter customer defections and hidden costs that outweigh any potential savings they derive from outsourcing, it said.

There are benefits to be gained from outsourcing non-core processes, but rewards will not be instant and organizations should adopt a controlled and phased approach, Gartner said.